Rural Homeownership Rising

by James Mikesell

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Having grown for nearly a decade, U.S. homeownership rates continue to break records, particularly in rural or nonmetro areas. At the start of 2004, about 75 percent of nonmetro households and 67 percent of metro households owned their homes. On average, nonmetro homes appear to be a good investment, having appreciated in value at least as rapidly as metro homes during the past decade.

Homeownership generally helps both owners and their communities. Owning one’s home has financial advantages, as homeownership serves as a hedge against rising housing costs, and contributes to investment and wealth accumulation. For most households, tax advantages also add to the benefits of homeownership. For all U.S. homeowners, the median equity in their home accounted for over half of their total net worth in 2001. And, homeownership by low-income households is associated with their children’s greater educational attainment and future financial success. Rural communities also benefit from homeownership. Homeowners tend to become more involved in their communities and work toward community improvements, such as better schools.

Homeownership levels and rates of change are distributed unevenly across geographic areas. Although the overall nonmetro homeownership rate rose 3 percentage points during the 1990s, one of every four nonmetro counties actually experienced a decline. Nonmetro homeownership rates were lowest in the West and along the Mississippi River in Arkansas and Alabama. Nonmetro homeownership was highest in the upper Midwest, from Michigan to North Dakota.

Nonmetro homeownership rates vary by age group as well. Homeownership rates are particularly high for older persons. Over 82 percent of nonmetro householders age 65 or older owned their home in 2000, compared with 76 percent in metro areas. For most age groups, nonmetro homeownership rates exceed metro rates. Nonmetro minority households and poor households consistently have rates of homeownership well below the norm, but these households are also experiencing the most rapid gains. In nonmetro areas, 59 percent of Hispanics owned their homes in 2000, up from 50 percent a decade earlier. Low-income households may benefit from Federal, State, and local programs designed to make homeownership more affordable. One such program is USDA’s single-family direct home loan program, in operation for over 50 years in rural America. This has been the major Federal program to provide low-income rural families with low-interest home mortgages over the last three decades.

What does the future hold for homeownership in rural America? Most likely, nonmetro homeownership will continue to grow. This was even the case during the recent economic downturn, when the most vulnerable population groups experienced the largest increases. Nonmetro homes appear to be a good investment, and rural borrowers today are better off in the cost and availability of home mortgages than in the mid-1990s.